India plans LNG storage expansion with tariff surcharge to secure supply
New storage tanks and pipeline fees aim to cushion against global price volatility.
1Strategic storage boost
India plans to add 15 overground LNG storage tanks, increasing national capacity by two weeks. The ₹15,000 crore investment supplements existing 12-day storage across 20+ tanks. This addresses India's 50% import dependency on natural gas, exacerbated by West Asia supply disruptions. The Petroleum and Natural Gas Regulatory Board (PNGRB) is coordinating with state-run companies including GAIL, Indian Oil, and Petronet LNG. Storage facilities will be located near existing regasification terminals to optimize infrastructure.
2Tariff surcharge mechanism
A proposed 10% surcharge on pipeline tariffs will fund the storage project, affecting city gas distributors and fertilizer plants. Current tariffs range from ₹54 to ₹110.86 per mmBtu based on distance. Officials estimate minimal consumer impact—₹4-5 monthly increases—as costs will be distributed across the value chain. The surcharge democratizes infrastructure financing while maintaining affordability. This follows temporary LNG use restrictions for industries during recent supply crunches.
3Price volatility shield
The storage plan aims to insulate India from global LNG price spikes by enabling bulk purchases during low-price periods. PwC's Manas Majumdar notes stored LNG provides pricing leverage when international markets surge. Currently, 6% of India's energy mix comes from natural gas, with a 2030 target of 15%. The strategy mirrors emergency supply protocols recommended by former petroleum secretary Anil Razdan, who criticized two decades of inaction on storage infrastructure.
4Sectoral consumption patterns
Fertilizer plants consume 58 mmscmd daily—the highest among user sectors—followed by city gas (37 mmscmd) and refiners (22 mmscmd). While CNG relies on domestic gas, other sectors depend heavily on imports. Projections show gas demand reaching 297-365 mmscmd by 2030, with industrial/commercial growth at 10-15%. Indian Gas Exchange CEO Rajesh Mediratta emphasizes storage's role in meeting rising CNG/PNG demand alongside industrial needs.
5Import economics
India's FY26 gas imports totaled $13.4 billion, with Qatar supplying 42% pre-conflict—now reduced to 3.8%. Longer-haul US shipments increase freight costs. 55% of LPG imports transited Hormuz before disruptions. Eight operational LNG terminals provide 52.7 mmtpa regasification capacity, with more FSRUs under development. The storage plan complements existing 60-day gas/LNG inventories in pipelines and transit, creating a multi-layered supply buffer.
6Regulatory coordination
PNGRB's proposal aligns with the petroleum ministry's push for overground storage near LNG terminals. This follows Mint's earlier report on West Asia contingency planning. The regulator's demand projections inform capacity targets, while marketing companies like GAIL will execute builds. Former officials stress storage's necessity given import reliance, suggesting costs should be moderately passed to consumers—a view supported by current tariff structures.
7Operational challenges
Implementing the surcharge requires balancing infrastructure financing with consumer protection. The second source notes careful value-chain cost allocation will minimize tariff impacts. Storage sites' proximity to regasification terminals reduces logistical hurdles. However, Europe's winter demand may tighten global LNG supplies, testing India's new buffers. The plan's success hinges on synchronizing storage expansion with terminal development timelines.
8Long-term energy security
This storage initiative marks a strategic shift in India's gas infrastructure policy after years of underinvestment. By creating physical reserves and financial mechanisms simultaneously, India addresses both supply security and price stability. The dual approach—capacity expansion plus tariff restructuring—provides a model for managing import-dependent commodities. As global LNG markets remain volatile, such systemic buffers become critical for industrial planning and economic resilience.